China’s losing battle against state-backed polluters

Many state-owned mining firms, some of China’s worst polluters, were carved out of government mining bureaus and still enjoy a cozy relationship with local governments, making it difficult for the central government to improve environmental standards

By David Stanway / Reuters, SHANGHANG COUNTY, China

Illustration: Mountain People

When Zijin Mining Group threatened to move its headquarters about 270km from its home county of Shanghang to Xiamen on China’s southeast coast, a local Chinese Communist Party (CCP) boss rushed to confront Zijin Mining chairman Chen Jinghe (陳景河).

“If you want to move, you’ll have to move the Zijin Mountain to Xiamen as well,” the official told Chen, referring to a vast local mine that has helped transform the firm into China’s top gold producer and second-biggest copper miner.

The exchange, recited with some pride by local residents, reflects the anxieties felt by regional governments as they consider the prospect of losing their biggest cash-cows.

It also highlights the challenges facing Beijing as it tries to take on entrenched local bureaucracies and the powerful state-owned polluters they sponsor and protect, with the central government desperate to address decades of chronic environmental damage and force growth-addicted provinces to raise standards.

“The problem is that they still chase profit,” said one resident outside a store near Zijin’s Shanghang headquarters, who did not want to give his name. “Protecting the environment is like taking medicine, and they don’t want that.”

Zijin Mining is one of China’s biggest state-owned firms, with projects in 20 provinces and seven countries. In 2010, it was rocked by two major pollution scandals that cost it millions of yuan in fines and compensation payments, and battered the share price of its listed vehicles in Shanghai and Hong Kong. It had already been reprimanded by the Chinese Ministry of Environmental Protection for failing to meet standards and its reputation was now badly damaged.

In Shanghang itself, a 9,100m3 torrent of toxic slurry from the Zijin Mountain gold-copper mine burst through a tailings dam and entered the Ting river, killing 4 million fish. It took nine days before Zijin admitted a problem had occurred, prompting accusations of a cover-up by state media.

However, Shanghang is a one-company town, and the Zijin Mountain mine dominates the landscape and the economy, providing 70 percent of local revenues, and most of the county’s jobs.

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Zijin’s largesse has helped build a highway connecting Shanghang to the rest of Fujian Province and has funded a building boom. While residents remain wary, the local government is reluctant to do anything that could jeopardize growth.

Shen Hongbo (沈紅波), a professor at Shanghai’s Fudan University who studied the 2010 incidents, believes the Zijin case is of “universal significance” and raises questions that apply to hundreds of state-owned firms and their government sponsors.

Hugely dependent on the tax revenues and jobs provided by big polluting firms, local authorities have long been regarded as one of the biggest obstacles to Beijing’s promises to reverse decades of environmental damage.

Xinhua news agency said in an editorial last month that “blame lies in governments at different levels” for chasing growth and letting environmental problems fester.

According to a proposal submitted by delegates at last month’s National People’s Congress, there have been more than 30 serious incidents of heavy metal pollution in the past three years, and many were caused by “regional governments blindly pursuing economic development, as well as law enforcement and supervision not being strong enough.”